Analysis: YouTube Rolls Red Dice

YouTube Rolls Red Dice

YouTube Rolls Red Dice

  • Posted on: 11/Nov/15
  • by Simon Britton

YouTube Red launched in the US last week. It's a gamble, but something had to give. YouTube's domination of the UGC space has been eroded by newcomers like Facebook video, Snapchat and Vine. Netflix is on the path to world domination in the SVOD space. Vessel is a direct threat to YouTube's core content. YouTube was caught in the middle, with growing aspirations towards premium content. How will it play out? ~~

Really, did anyone watch the Ads?
The YouTube True View format was a nice idea - giving users the option of skipping an ad. Unless they wanted to support a particular content creator, I suspect the vast majority of users skipped the ads. With the whole world trending towards subscription based services for content (Spotify being the leader in the space), it was inevitable that YouTube tweaked its revenue model.

The Red Model
For $10 per month, users get a subscription across all of YouTube/Google - this includes YouTube Red, Google Music, with exclusive content, background play and offline play. All ad free. Including Google Music in the offer is a smart move that may entice Spotify users who are not that interested in YTR users into jumping ship just to check it out.

Will consumers Play?
The success of YouTube Red will hinge on exclusive content. Netflix hung its hat on exclusives like House of Cards and OITHNB and it worked. Once you dig deeper into their back catalogue, there's nothing to differentiate their offer.
Earlier this year, Alex Carloss, head of Originals at YouTube said “We’ll start with the next level for a lot of our creators; we’ll fund beyond what they are typically able to realise”
You can see the current YouTube Red originals offering here.
What does it look like? Well Oz users are locked out, but stay tuned, we have ways.....
From looking at the loglines, I would have hoped for some more "webisodic" content. Even Vimeo, without the bottomless resources of a Google behind it, was able to make a splash when it launched it's On Demand service with the original drama series High Maintenance.

A new era for YouTube creators?
So, assuming consumers take up the Red offer en masse, YouTube is now in the SVOD space with Amazon Prime, Netflix, Hulu and the rest. Is this a new dawn for YouTube creators who have seen minimal returns on their content despite large viewership?
First, creators need to get over the speedhump which says that if they don't agree the YouTube Red terms, their videos will be made private. Then if the subs start pouring in, creators could start to see Red as a more reliable income stream. Why? Because we are punting on the engaged user who always skipped ads and consequently never "paid" content creators now paying a small amount every month.
Exactly how the subscription revenue from Red will be divvied up is a bit vague at the moment - YouTube says:
"New revenue from YouTube Red membership fees will be distributed to video creators based on member engagement with each creators' content. As with our advertising business, the majority of the revenue will go to creators."
Member engagement huh? User engagement means watch time, how long users stay on the channel and how they comment on or like content. Sounds like a much trickier formula than the straight out division of ad revenue in the old ad model.

Australian Content Creators - what now?
When Red arrives next year, we will have had the benefit of seeing what the uptake has been and how the YouTube Originals offering is working. If you have a successful channel, you could be up for two things - a more reliable income stream from a split of subscriber income and the potential to share in the YouTube Originals push. YouTube Australia must be getting their Originals slate worked out as we speak. I'm going to do some more digging.

You can see the offficial guide to Red here

About the author

  • Simon Britton

    Simon Britton

    Simon is screen industry consultant and publisher of Australia’s leading online screen content ebulletin ScreenPro (www.screenpro.tv). Before launching MediaWave in 2008, he worked for the Australian Film, TV and Radio School’s Centre for Screen Business, focusing on emerging business models for online screen content. He has consulted to, or written research papers for, the South Australian Film Corporation, Screen Australia, Film Victoria and The Australian Film TV and Radio School. He's delivered workshops for SPAA, The Media Resource Centre, Open Channel, RMIT, Monash University, UCLA Film School and AFTRS. He is currently running national workshops on new models of finance and online distribution for screen content. He recently concluded a three-year term on the Board of the Australian Screen Institute (AFI). He is on the Board of Open Channel. Simon consults on film projects and is currently working with a range of content creators to develop strategies for online delivery of their work.